Iron ore futures in China dropped to two-week lows on Tuesday as appetite for the steelmaking raw material waned ahead of closures in the eastern city of Hangzhou for the G20 summit next week. The lack of buying interest from top consumer China has pulled spot iron ore back below $60 a tonne. Renewed weakness in steel prices also pressured the raw material.
"The forced closure of steelmaking capacity ahead of next week's G20 summit in Hangzhou has seen enquiries shrink in recent days," ANZ Bank analysts said in a note. Many small Chinese mills around Hangzhou have been ordered to suspend production to improve air quality ahead of the September 4-5 meeting of world leaders. A survey of 32 construction-steel mills in the region by industry consultancy Mysteel showed that almost half have either halted or curbed output since July, cutting steel output by nearly 1 million tonnes as part of the G20 and environmental curbs.
The most-traded iron ore on the Dalian Commodity Exchange closed 1.1 percent lower at 418 yuan ($63) a tonne, after matching Monday's trough of 414.50 yuan, the lowest since August 15. Further losses in Chinese futures could weaken spot iron ore further, having already slid nearly 5 percent from a 3-1/2-month high of $61.80 reached on August 16.